Do you know what to do when you inherit a house? Unless you inherit a home from a distant relative that you’ve never met, the process can be both emotionally and physically taxing. Inheriting a house can ultimately help your circumstances, but depending on the situation, there’s a lot of information to consider and emotions to process.
Most of the time, families hire outside parties to help them appraise, empty, and potentially sell a family home because doing it yourself can be too overwhelming. However, it’s not impossible to tackle this life transition on your own even if you’re inheriting a house full of stuff.
Don’t let complicated tax laws and sentimental attachments keep you from moving forward, but don’t feel like you have to rush the process either. Balance is key. Read through the following advice if you are having trouble figuring out what to do with the house and everything inside.
What To Do When You Inherit a House
First, you need to decide whether you are going to sell, rent, or reside in the inherited house. The answer to this question can be complicated. Before you make an impulsive decision, consider all the pros and cons of each option.
Write down the answers to the following questions and talk them through with other people involved. The act of writing could lessen the emotional impact and help you counter your decision with some logic.
Financial aspects to consider:
- Is the mortgage paid off? If the mortgage is paid down, there could be a substantial potential profit when selling. However, if the mortgage owed is more than the house is worth, it might make sense to rent or live in the house for a few years and pay down the mortgage.
- What tax consequences are involved with the house? There may be certain tax liabilities depending on your financial situation and the state in which you live. Consult a tax professional or accountant before deciding what to do with the house. Federal estate taxes may apply depending on how much the estate is worth.
- Are there tax advantages to consider? There might be some capital gains tax benefits if you decide to sell the house right away. The value of the home is determined at the time the estate goes into effect. What this means is that if your parents bought a home for $50,000 and you sold it for $150,000, you won’t pay capital gains taxes on that profit. However, if you kept the house for a couple of years and sold it at a later date for $200,000, you would pay capital gains tax on the $50,000 profit. There are some exceptions to this rule. When your head is clear, seek a tax professional’s advice.
Practical questions to consider:
- Who else is on the title? If there are other siblings involved, the cleanest solution may be the sell the house and split the profits evenly. However, you may opt to buy out your siblings so you can live in the home. You will have to determine a fair market value and split the percentage.
- Would the property work as an income property? If you know you won’t live in the house but are reluctant to sell the property for sentimental or financial reasons, could you turn the house into a rental? Sometimes it takes families a long time to process the loss of a loved one. Estates can sit empty for a year or two before any action is taken, which could result in lack of maintenance and other issues. One option is to rent the home during this down period and put your loved one’s belongings in storage. This way, you are getting some income while you process the loss. Some decisions are better made when you’re further along in the grieving process. In some cases, the decision to rent could be strictly for financial reasons.
How to Clean Out an Estate
Once you have a plan for the inherited house, you need to determine how to clear out the house. If your loved one downsized their belongings in advance, this process could be less stressful. Take the following steps to handle an estate cleanout in a way that honors your loved one’s memory and helps you heal.
Dealing with sentimental items:
- Give yourself time to process. There’s no single timeline that is right for everyone. Some people will be ready to handle the estate process in a couple of days, and some people might need a couple of months. As long as you are moving forward in any capacity, take the time you need. Try not to get stuck in place and make small strides forward when you are feeling up to it.
- Step outside your comfort zone. In some cases, this process might require stepping outside your comfort zone, and that’s okay. Emotions are a natural part of the grieving process, but you want to honor them and not act on them when making significant decisions that could impact your family. Notice when you’re feeling overwhelmed and take some time before you ultimately decide what to do with the fridge or what estate sale company to hire, for example. But remember, having emotions is normal, so try not to avoid them.
- Put sentimental items in storage. Before you have an estate sale or garage sale, go through the house with your siblings and write down any items that bring up an emotional response. One idea is to put these items into storage to give yourself more time to decide what you want to do with them and who in your family might want them. These items don’t need to slow down cleaning out the estate, though, which is why we recommend putting them offsite and returning to them later.
Clearing out the rest:
- Clean out and toss broken items. Go through the house room by room and clean out the clutter. Toss broken items that won’t sell and do things like clean out the fridge and pantry. We recommend tackling one room at a time, so you don’t overwhelm yourself. Check-in with yourself and see if you need to take a break. If you’re feeling overly stressed, that’s a sign of stopping and coming back later. Or better yet, ask some friends to help with this stage.
- Host an estate sale. One of the most profitable ways to clear out your parent’s house is to hold an estate sale. It’s strongly advised to hire this part out to a reliable company. You will have to pay the company a percentage of the sale. However, being able to be off-site while people barter over your loved one’s items can be worth the cost. If you decide to host a sale, have the person in the family with the most business acumen handle the bartering.
- Donate items that are left. Sometimes an estate company will buy out the rest of the belongings and clear the house. If they don’t, research companies that will take donations and come to the house to pick them up for you. This extra call should eliminate some heavy lifting.
Inheriting a house is an honor, but it’s also a big responsibility. We hope these tips helped you find a little peace in the process. Good luck!